In 2018, the United States reimposed sanctions it had suspended three years earlier as part of Iran’s nuclear deal with major world powers. That November, Binance informed traders in Iran that it would no longer serve them, telling them to liquidate their accounts. But in interviews with Reuters, seven traders said they were circumventing the ban. Traders said they continued to use their Binance accounts until September last year, only losing access after the exchange tightened anti-money laundering controls a month earlier. Until that point, customers could transact by registering with just an email address. Sign up now for FREE unlimited access to Reuters.com Register “There were some alternatives, but none of them were as good as Binance,” said Asal Alizade, a trader in Tehran who said she used the exchange for two years until September 2021. “No identity verification was required, so everyone I used it.” Eleven other people in Iran, in addition to those interviewed by Reuters, said on their LinkedIn profiles that they too traded cryptocurrencies on Binance after the 2018 ban. None of them responded to questions. The popularity of the exchange in Iran was known within the company. The officials were aware of, and joked about, the growing ranks of Iranian users of the stock market, according to 10 messages they sent to each other in 2019 and 2020 reported here for the first time. “IRAN BOYS,” wrote one of them in response to data showing Binance’s popularity on Instagram in Iran. Binance did not respond to Reuters’ questions about Iran. In a March blog post published in response to Western sanctions on Russia, Binance said it “strictly follows international sanctions rules” and has assembled a “global compliance team, including world-renowned sanctions and law enforcement experts ». Binance said it used “bank-grade tools” to prevent sanctioned individuals or entities from using its platform. Iran’s mission to the United Nations in New York did not respond to a request for comment. Iranian stock trading could attract the attention of US regulators, seven lawyers and sanctions experts told Reuters. Binance, whose holding company is based in the Cayman Islands, says it does not have a single headquarters. It did not provide details about the entity behind the main exchange Binance.com which does not accept customers in the United States. Instead, US customers are directed to a separate exchange called Binance.US, which — according to a 2020 regulatory filing — is ultimately controlled by Binance founder and CEO Changpeng Zhao. Lawyers say this structure means Binance is shielded from direct US sanctions that bar US companies from doing business in Iran. This is because traders in Iran used Binance’s main exchange, which is not a US company. However, Binance is at risk of so-called secondary sanctions, which aim to prevent foreign companies from doing business with sanctioned entities or to help Iranians evade the US trade embargo. In addition to causing reputational damage, secondary sanctions can also stifle a company’s access to the US financial system. Binance’s exposure will depend on whether the sanctioned parties trade on the platform and whether Iranian clients avoided the US trade embargo as a result of their trades, four lawyers said. Non-U.S. exchanges “may face consequences for facilitating sanctionable conduct where they have exposure to allowing trades to be processed for the sanctioned parties or if they board these types of users,” said Erich Ferrari , principal attorney at Ferrari & Associates law firm in Washington. Reuters found no evidence that people under sanctions were using Binance. Asked about traders in Iran using Binance, a spokesman for the US Treasury declined to comment. Binance maintained weak compliance checks on its users until last year, despite concerns raised by some senior executives at the company, Reuters reported in January, based on interviews with former senior employees, internal messages and correspondence with national regulators. The stock exchange said in response that it was pushing industry standards higher. A new Reuters report shows for the first time how loopholes in Binance’s compliance program allowed traders in Iran to operate on the exchange. Binance dominates the $950 billion crypto industry, offering its 120 million users a wealth of digital currencies, derivatives and non-tradable tokens, processing hundreds of billions of dollars worth of transactions per month. The exchange is becoming more and more mainstream. Zhao’s billionaire founder – known as CZ – expanded his reach into traditional businesses this year by committing $500 million to Tesla boss Elon Musk’s planned takeover of Twitter. Musk has since said he is pulling out of the deal. Last month Binance hired Portuguese soccer star Cristiano Ronaldo to promote its NFT business.
“BINANCE PERSIAN”
Since the 1979 Islamic Revolution, the West and the United Nations have imposed sanctions on Iran in response to its nuclear program, along with alleged human rights abuses and support for terrorism. Iran has long maintained its nuclear program for peaceful purposes. Under the 2015 deal between Iran and six world powers, Tehran curbed its nuclear program in exchange for easing some of the sanctions. In May 2018, President Donald Trump abandoned the deal and ordered the reimposition of US sanctions that had been eased under the deal. The restrictions were reinstated in August and November of the same year. Following Trump’s move, Binance added Iran to a list of “sanctioned countries” under the terms of service agreement, saying it could “restrict or deny” services to such areas. In November 2018, it warned its customers in Iran via email to withdraw encryption from their accounts “as soon as possible”. Publicly, some Binance executives praised its compliance program. Its then-chief financial officer said in a December 2018 blog that it had invested heavily in the fight against money laundering, saying it took a “proactive approach to detecting and combating money laundering”. In March of the following year, it hired a US compliance platform to help it screen for sanctions risks. Until August 2019, Binance considered Iran – along with Cuba, Syria, North Korea and Crimea – a “HARD 5 SANCTIONS” jurisdiction where the exchange would not operate, according to an internal document seen by Reuters . The May 2020 document included Iran in a list of “strictly no” countries, citing chief compliance officer Samuel Lim. Even as Binance’s stance on Iran hardened, its profile among the country’s legions of crypto users was rising, traders said, citing their knowledge of the local industry. Cryptocurrencies became attractive there as sanctions severely affected the economy. Since bitcoin’s birth in 2008, users have been drawn to crypto’s promise of financial freedom beyond the reach of governments. Cut off from global financial services, many Iranians have relied on bitcoin to do business online, users said. “Cryptocurrency is a good way to bypass sanctions and make good money,” said Ali, a trader who spoke on the condition of being identified only by his first name. Ali said he has been using Binance for about a year. He shared with Reuters messages with Binance customer service representatives that showed the exchange closed his account last year. They said Binance was unable to serve users from Iran, citing recommendations from the United Nations Security Council sanctions lists. Other traders on the exchange cited weak background checks on clients, as well as an easy-to-use trading platform, deep liquidity and a large number of cryptocurrencies that could be traded as reasons for its growth in Iran. Pooria Fotoohi, who lives in Tehran and says he runs a crypto hedge fund, said he used Binance from 2017 to September last year. Binance won over the Iranians because of the “simple” checks its customers know, he said, noting how traders could open accounts just by providing an email address. “They were able to gain a huge volume of trading, with many currency pairs, in a short period of time,” Fotoohi said. Binance angels – volunteers who share information about the exchange around the world – also helped spread the word. In December 2017, Angels announced the launch of a group called “Binance Persian” on the messaging app Telegram. The group is no longer active. Reuters was unable to determine how long it operated, but identified at least one Iranian who was an active angel after Washington reimposed sanctions. Mohsen Parhizkar was an Angel from November 2017 to September 2020, managing the Persian team and helping its users, according to his LinkedIn profile. A person who worked with Parhizkar confirmed his role and shared messages they exchanged. Contacted by Reuters, Parhizkar said Binance had canceled programs in Iran due to sanctions. He did not provide further details. After it was banned in 2018, at least three senior Binance employees knew the exchange remained popular in Iran and was used by customers there, 10 Telegram and company chat messages between employees seen by Reuters show. As of September 2019, Tehran was among the top cities for followers of Binance’s Instagram page, surpassing New York and Istanbul, according to a post from the same month. Then the workers revealed it. Someone jokingly suggested touting Binance’s popularity in Iran, saying, “Push it on Binance US Twitter.” In a separate exchange from April 2020, a senior official also noted that…
